What the commodity markets can look forward to from the Trump-Xi Summit

The trade in agricultural products, energy, and rare earths have become the major bargaining cards in the trade dispute between the United States and China. They are likely to be discussed again next week when President Donald Trump hosts his counterpart Xi Jinping at the White House.

What else do we know?

AGRICULTURE

Agri-products, including soybeans, are one of the largest US exports to China. They will reach $29 billion by 2024. These are also 'among?the least sensitive areas of the trade relationship, and therefore a likely area to reach an agreement.

According to the White House, China agreed at the Busan Summit in South Korea to buy 25 million metric tonnes of US soybeans per year until 2028. US officials claim Beijing agreed to purchase another $17 billion worth of agricultural products during Trump's May visit to Beijing.

Beijing has not acknowledged these agreements but is still 'on track' to meet its soybean commitment. To hit the other, it will likely require exempting agriculture imports from the final 10% tariff left over from the 'trade war.

Analysts anticipate some waivers, after US Trade Representative Jamieson Grer stated on September 3, that there could be an announcement to encourage US agricultural sales to China. Sorghum and corn could be candidates, as they have historically been the two largest exports outside of soybeans.

ENERGY

China was a modest and intermittent buyer of US gas and oil over the last decade. But imports ceased last year when Beijing implemented tariffs between 10% and 15%. Washington has been trying to 'change that' since Trump visited Beijing in May.

Bloomberg reported Tuesday that energy tariffs may be included in a $30 billion package containing reciprocal tariff reductions flagged following the May summit, but not yet implemented. This could lead to a resumption in imports which ranged between $7.5 billion and $12 billion annually between the end the previous trade conflict in 2020 to 2024.

This would not translate into a huge windfall for US producers of LNG. Although Chinese LNG imports stopped following the tariffs on July 1, Chinese buyers still fulfill long-term contracts with their US suppliers, but resell the cargoes once purchased.

Sanctions

China has been historically one of the biggest buyers of Iranian crude oil, and Russia's. The US has sanctioned refiners as well as other entities over the years for this trade. The US has threatened to impose new sanctions and also ended some before the summit.

Trump stated that he would consider lifting certain sanctions following his visit to Beijing. However, they are still in place. Since August, US Treasury secretary Scott Bessent oversees a new effort to impose secondary sanctions on banks that finance Iranian trade. However, Chinese banks are conspicuously missing.

RARE EARTHS

China's decision to limit exports of rare earths to the US and its control over production brought Trump to the table at the beginning of this year. While more material has now been flowing from China, the issue is still not resolved.

US firms in'sensitive industries, such as chipmaking or aerospace, still struggle to gain 'access. Some Chinese exporters are afraid of the repercussions if relations worsen again with Beijing.

The US has repeatedly urged Beijing to honor its commitments and keep critical materials flowing.

(source: Reuters)